Prescription for Leadership

Seemingly, divine providence has delivered the Democrats the perfect issue for 2006 -- the epic Medicare prescription-drug screwup. Far from being an abstract (if grave) public issue like nuclear non-proliferation, this one hits up close and personal. If you don't feel the drug debacle directly, you know about it from Mom or Grandpa.

With its bewildering and useless “choices” of dozens of plans and vendors, its additional costs to more than six million low-income elderly Medicaid patients, its “doughnut hole” of huge out-of-pocket expenses, and windfall profits to the drug and insurance industries, the debacle also vividly demonstrates a core Democratic precept: Sometimes public purposes are better achieved directly through the public sector.

Nor is this just a case of start-up glitches (when public Medicare began in 1966, there were few administrative problems). The fragmentation, inefficiency, and burden to the elderly are the predictable consequence of Bush's treatment of his program as a bonanza for the drug and insurance industries.

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Unlike the plan, the remedy isn't complicated. It almost writes itself: Get rid of the parasitic private-insurance vendors and move the program back into public Medicare. Have modest co-pays rather than a doughnut-hole that can leave old folks paying upward of $3,000 out of pocket every year. Pay for that fix by restoring Medicare's ability to negotiate bulk discounts with drug companies, as the Veterans Health Administration does.

Likewise the election-year message: Republicans are not serious about governing. They ruin programs that citizens actually value -- by turning them into giveaways to special business interests. “This issue is as real to seniors as it's ever going to get,” says former Democratic Senate leader Tom Daschle.

So this strategy is central to the Democrats' 2006 campaign, right? Well, sort of. The party is hobbled by three old reliables: ideological division, freelancing on the part of diverse senior legislators, and a leadership that has trouble staying focused.

In the Senate, the ranking Democrat on the Finance Committee, Max Baucus of Montana, backed Bush's plan. Baucus wants to reduce the profusion of private plans, but not reverse the whole approach. At an oversight hearing February 8, Baucus criticized two aspects of the program's implementation -- the excess number of drug plans and the implementation of the Medicare-Medicaid transition, but declared that: “I supported enactment of the Medicare drug benefit in 2003. I still support it.”

The position is of a piece with Baucus' record on the question. When Republicans went to conference committee in 2003, they kicked out all the Democratic conferees who opposed the private approach. Only Senators Baucus and Breaux, who gave the Republicans bipartisan cover, were allowed in the room. And recently, Baucus hired Michelle Easton as his chief staffer on drug issues. She previously worked for Breaux, then became a lobbyist for PhRMA, representing the drug companies.

Senator Debbie Stabenow will shortly introduce a bill with several co-sponsors, that would restore Medicare's authority to negotiate drug prices and offer a direct Medicare plan that fills in the “doughnut hole.” But Stabenow will count herself lucky if much more than half the Democratic caucus supports her bill.

Other centrist Senate Democrats have their own pet fixes. For instance, Bill Nelson of Florida, facing reelection this year, wants to give seniors a year in which to change private plans without facing penalties. It's a benign small-bore improvement -- which ducks attacking the whole Bush approach. Still others, like North Dakota's Kent Conrad, resist a wholesale repudiation of the Bush bill because they voted for it. So, among Senate Democrats the big risk is: mixed message.

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Over on the House side, there is at least nominal unity. Nearly every House Democrat opposed Bush's legislation in 2003. This year, a bill sponsored by Marion Berry of Arkansas would restore a central role for public Medicare. House Minority Leader Nancy Pelosi's office says the bill will be the official Democratic alternative. But as we go to press, only 80 Democrats have signed on. One problem is getting Pelosi's attention. A key Democratic policy aide complains, “They have the attention span of a gnat.”

A related problem is that senior Democrats still subconsciously fancy themselves as the party of government. John Dingell, the ranking Democrat on the Energy and Commerce Committee, has a good bill to make sure the disabled get needed medications and that states are not left holding the bag. Pete Stark, another certified progressive, has a bill to extend the enrollment period and waive late fees. All good ideas -- but with Republicans terrified of reopening any aspect of the program, these bills stand little chance of passage and risk muddying the overall Democratic message that the entire Republican approach is wrong.

Some fiscally conservative Democrats worry that improving benefits under public Medicare would increase costs. But a study by the economist Dean Baker of the Center on Economic and Policy Research calculates that getting rid of private insurance vendors and restoring Medicare's negotiating authority would save about $600 billion, enough to close the entire doughnut hole and return money to the Treasury.

Here, the supposedly bipartisan Congressional Budget Office (CBO) has played an instructively sneaky role. Until recently, CBO miraculously seemed an oasis of relative honesty and professionalism. You could actually trust its budget projections as good faith efforts rather than partisan spin. Former CBO Director Dan Crippen, a Howard Baker protégé who directed the office from 1999 to 2003, was even attacked from the right for refusing to cook projections in line with supply-side assumptions that tax cuts would supposedly increase revenues.

But CBO's role in the prescription drug affair has been shamelessly partisan. For starters, when the Bush White House first proposed the idea and fiscal conservatives in both parties blanched at the likely cost, CBO helpfully low-balled the true budget impact. In 2003, CBO pegged the 10-year net cost at just under $400 billion. Today, CBO admits it's more like $600 trillion, and the Department of Health and Human Services (HHS), which actually runs the program, now puts the figure at $797 trillion. That projection, in turn, was recently reduced (February 2) from last year's HHS estimate of $926 trillion, in part because the sheer complexity of the program is dissuading so many people from signing up.

But the more serious mischief came in the way CBO scored the impact of eliminating Medicare's right to negotiate drug prices and the privatization of the whole program.

As early as 2002, Crippen was insisting in meetings with senators, based on no evidence whatever, that a Medicare drug program run by private insurers would yield a net savings. Because of this premise, CBO continues to insist, absurdly, that putting the drug program back in public Medicare would add costs. Daschle says, “We had huge fights with Crippen, who was extremely ideological and beholden to the Republicans, and just did their spin. It was flatly illegal.”

CBO didn't deign to crunch any numbers. It simply made a grand assumption that competition, by definition, must lower prices. In letters to Senate Majority Leader Bill Frist and Democrat Ron Wyden in early 2004, Crippen's successor, Douglas Holtz-Eaken, contended that “risk-bearing private plans will have strong incentives to negotiate price discounts.” But CBO ignored the fact that the fragmentation of multiple plans undercut the ability of any single plan to bargain hard.

Subsequently, Families USA conducted a detailed survey comparing what Medicare drug plans and the Veterans Health Administration paid for the 20 most heavily prescribed drugs. The VA sets a schedule of prices, and sure enough, the median cost to the Veterans hospitals was 48 percent less than the cost paid by the lowest-cost private Medicare plan.

A similar study by Congressman Henry Waxman found that drug prices offered by 10 leading Medicare drug plans are more than 80 percent higher than federally negotiated VA prices. The Medicare drug plan prices are higher even than retail prices available from Drugstore.com and Costco.

But CBO has declined to revise its projections. “Their 2003 assumption has been tested,” says Ron Pollack, executive director of Families USA. “I don't know how in the world CBO can possibly justify that estimate, given what we now know.”

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In the 1990s, private insurers won the right to offer managed-care plans to compete with public Medicare. Their costs proved higher than conventional Medicare, even though they cherry-picked healthy oldsters and exported sick ones back to the public system.

But this opening to private insurers was the camel's nose under the tent. Today, after the insurance industry has had nearly three years to insert itself into a new trillion-dollar bonanza, few Democrats have the nerve to kick the industry out altogether. Even the relatively liberal Democratic bills merely require Medicare to offer a public program to compete with private ones. “We hope that most people would just sign up for the public Medicare plan,” says an aide to a key congressman.

There is also some timidity about serious regulation of drug prices, disparaged as “price controls.” But the rest of the health-insurance system uses price controls. Medicare, Medicaid, and private insurers all regulate the prices they pay doctors and hospitals. It's only drug makers who get to set their own prices and have government pay.

We've had an instructive experiment here, and privatization fails. Restoring the drug program to public Medicare would be far more cost-effective and user-friendly. It could be a giant step toward universal, single-payer health insurance generally. But will Democrats make good use of it?

The columnist Ellen Goodman, praising the late Betty Friedan's contribution of giving political voice to women's private struggles, recently wrote that “the most powerful catalyst for change [occurs] when people learn what they already know.” In this sense, political leadership can be defined as helping bring about a political understanding of assaults people already know from their daily lives.

Americans know, personally, that Bush's drug program is a bomb. If Democrats can summon up a measure of principle and unity, the Medicare-drugs issue could vividly demonstrate why right-wing government is bad for ordinary people. If not, the voters will hear merely a medley of diverse Democratic complaints -- a multi-pitched election-year whine.